Trump set to change market dynamics

Remember Fed Watchers? It was like a market fetish – watching Sir Alan Greenspan’s every move, as a possible ‘hint’ of interest rate policy. Was his briefcase heavy? Did his shoulder sag more than usual – indicating many papers in the briefcase, which means the Fed has a lot to decide? Those were the days.. although Ben didn’t seem to have the intellectual charisma of Sir Alan, Ben Bernanke seemed to work as a robot, with no indications from his personality whatsoever, not even a twitch of his beard. No comment about the current Fed Chair.

Just in time for his inauguration, London-based fintech firm Trading.co.uk is launching an app that will generate trading alerts for shares based on comments made on social media by Donald Trump.

Keeping one eye on the U.S. President-elect’s personal Twitter feed has become a regular pastime for the fund managers and traders who invest billions of dollars daily on world stock, currency and commodity markets.

This is all well and good but what implications for the broader markets? Such a market force has frankly, never existed. When someone like Bill Ackman tweets, people notice. But it won’t drop the USD Index by 1%, nor will it tank the Biotech Index, or tech. For better or worse, the Trump tweet effect is a new force that’s changing the market dynamic – let’s say for the better, because at least it’s disruptive. Fundamentally, short term spikes shouldn’t change anything, it’s just perception and knee jerk reaction. Algos should be adaptable, and if you’re trading for the long term fundamental play – short term moves shouldn’t matter too.

But this is a ‘visible hand’ that’s never been seen in the markets before. It’s a new risk, a new risk to hedge. It’s possible to hedge any risk, using options, futures, insurance, and other instruments.

On the other hand, entire strategies could be developed, just trading the Trump tweet momentum – but you’ll have to be quick!